Monday, November 25, 2013

You couldn't make this crap up!

"...The British
banking sector has become an organised criminal enterprise which has been
allowed to develop because of the criminogenic environment in which it
functions, which has resulted from the absence of any meaningful regulation
which those who control and manage the banks would fear.

" In this organised criminal category I
include the various mis-selling cases, including pensions, PPI Insurance and
interest rate swap derivatives; the criminal manipulation by Barclays and other
banks of the LIBOR interest rate structures; the institutionalised level of
money laundering as identified in the HSBC case; the serial abuse of the US
sanctions provisions as indicated in the Standard Chartered Bank case; as well
as many other examples of criminal actions such as theft of client funds,
teeming and lading, abuse of client instructions, insider dealing, front
running, churning, and market manipulation which have become the subject of
international regulatory interventions.

"...If the
recent financial devastation in UK financial markets has taught us anything,
one qualifier stands out above all the rest of the explanations. The effective
‘regulation’ of the market in financial services in the United Kingdom,
particularly in the areas of preventing and forestalling commercial activity
which has the capability to undermine the well-being of the financial market,
in which I include not only financial criminality and money laundering, but
also the pro-active identification and prevention of financial damage has, to all intents and
purposes, totally failed.

"...It has
failed despite the huge bureaucratic organisation which has been created for
its control, because those who are employed to provide the regulatory oversight
of the market, the Lead Regulator, the Financial Services Authority, and the
subordinate compliance officers within the individual regulated member firms,
do not and have never understood the true nature of the criminogenic
personality of so many of those who profess the trade of financial
practitioner, nor do they exhibit any great inclination to wish to deal with
the egregious activities of these individuals in a 'policing' manner..."

I wrote these words
as the opening section of my evidence which I presented to the Parliamentary Commission on
Banking.

My words and indeed,
my entire report were completely ignored, and the government servants on the
Committee sought to suppress my thoughts, on the grounds that I was saying
things 'the banks wouldn't like'!

Well, in the last
few days, we have been confronted with two more examples of behaviour of the
most egregious kind, which prove, once again, that I was right, and that the
British banking sector is a criminal sink, run by a bunch of the most
criminogenic individuals, who have no moral compass, but who have no fear of
the regulators, and so feel completely at ease with the commission of downright
criminal offences.

I am referring to
the Co-Operative Bank case, and to the latest scandal oozing from that
publicly-owned bag of sleaze, the Royal Bank of Scotland.

It's hard to decide
which is the more incredible story, the Co-op case with its lurid tales of sex,
drugs and Rock of Ages; or the ghastly crimes being unveiled at RBS as the
awful examples of business crime, bad faith, client gouging and general absence
of any pretence at commercial ethics, becomes public property.

I think I must start
with the RBS case, because it illustrates most clearly how the regulators have
completely renounced any pretence they might have had to providing any
meaningful regulation of the banking sector.

One of the duties of
the regulatory function is to ensure that a regulated member and particularly a
bank, is treating its clients fairly.

The FCA spells it
out:

"... Treating customers fairly (TCF)
remains central to our expectations of firms’ conduct, that firms put the
well-being of customers at the heart of how they run their businesses..."

They continue by
identifying how clients have a right to be treated with consideration in these
financially difficult times.

"... We expect
customers’ interests to be at the heart of how firms do business. Customers can
expect to get financial services and products that meet their needs from firms
that they can trust. Meeting customers’ fair and reasonable expectations should
be the responsibility of firms, not that of the regulator..."

Well, that was
clearly not the case with RBS.

Businessman Laurence
Tomlinson has delivered a report to Vince Cable in which he outlines examples
of egregious behaviour at RBS over the question of the way in which the bank
was treating its customers. In his report he refers to an investigation conducted
by The Sunday Times, saying;

“...The Sunday Times
has uncovered deeply alarming evidence of abuse of small businesses by RBS,
which is corroborated by many more cases . . . There is a wealth of evidence
which suggests that RBS has forced healthy, vibrant businesses into financial
trouble and . . . seized their assets to benefit its own vast property empire...”

The allegations
centre on RBS’s feared problem lending division, Global Restructuring Group
(GRG), which is tasked with maximising returns on loans deemed “risky”.

But far from being
“zombie companies”, many of the firms whose cases the Sunday Times newspaper
has examined had never missed a loan repayment and were surviving the economic
downturn before the bank pulled their finance.

RBS said it had put
the firms into GRG because it did not consider them viable. The unit has the
power to rip up loan deals, impose inflated interest rates and fines sometimes
running to hundreds of thousands of pounds, drain cash from accounts and halt
payments to suppliers and Her Majesty’s Revenue & Customs.

A former senior RBS
insider has alleged that, as the recession hit, staff were tasked with scouring
the loan book for businesses that had breached minor lending covenants so the
bank could pull the deal and put them into GRG. He said the breaches could be
as small as forgetting to file minor financial information.

Tomlinson’s report
covers allegations of abuse against all the big banks, but singles out RBS for
severe criticism. He accuses the bank of putting firms into GRG for minor
setbacks which were “so insignificant, given the otherwise positive performance
of the business, that the reaction of the bank can only be considered as
utterly disproportionate at best and manipulative and conspiring at worst”.

The bank insists
that it has every right to enforce the loan agreements in this way — but there
are questions about whether it is appropriate for a taxpayer-owned bank to
profit from the distress of small businesses in a downturn.

Whichever way one
interprets this 'red in tooth and claw' behaviour, one thing is clear. RBS has
behaved in a downright criminal manner, and their own conduct could be used in
evidence against them.

In one case of the
forcing of a valuable business into receivership, there is documentary evidence
available to show that a bank official described how the banks' own property
management company, West Register, “would have an appetite for the scheme.”,
meaning that they were very anxious to get hold of the property concerned to
add to their own portfolio. By forcing the company into threatened bankruptcy,
West Register were able to try and buy the property at a considerable under
value.

The presence of the
word 'appetite' in this state of affairs changes the criminogenic nature of the
actions engaged in by the bank, and puts them firmly into the area of the crime
of theft.

It proves that the
bank was not acting with the sole intention of protecting its loan book, and in
circumstances where foreclosure was the only alternative. The word 'appetite'
clearly indicates that the bank was anxious to add properties to its own
portfolio, and that it would do so at whatever opportunity.

Any criminal
investigation of these actions would focus intently on the similar fact
evidence demonstrated by the RBS department in the undermining of perfectly
solvent businesses by undervaluing their asset base. Such activity is clearly malicious
and would go to negative any argument that the bank was acting within the
limitations of its legitimate behaviour. The prosecutor would look at the way
and the manner of the RBS technique and invite the Jury to infer that there was
a 'method' by which RBS enriched themselves at the expense of their clients by
holding out loans which they later disclosed on spurious undervaluing of their
real worth, with the intention of taking over valuable real estate by a deceit.
Such a finding would clearly demonstrate the necessary element of 'dishonesty',
so all we need now is a prosecutor with the courage to take on the bank and the
relevant directors and executives concerned!

As for the Co-op
bank, well, what is there left to say?

A pathetic man who
was not a banker (not that that necessarily means a great deal, but it would be
nice to have an attempt made to find someone who could read a balance sheet),
and whose taste in Class A drugs and exotic young men singled him out as
perhaps someone who might not have been entirely 'fit and proper' to have
control of a licensed bank.

I don't care personally
about his own predilections, my concern is whether or not he is fit to have
control of other people's money, and whether his habits may have laid him open
to blackmail or unsound commercial judgments. Whatever, this is clearly yet
another case where the regulators should hang their heads in shame, because
they manifestly failed to undertake any proper due diligence into Paul Flowers'
suitability for the post he held.

So, only a few
months after the report of the Banking Commission, with the firm undertakings
that things were going to be different from now on, we are faced with two more
shameful exhibitions of British banking conduct.

The RBS case will
limp along until everyone is bored with the issue and another scandal has
surfaced to take its place. The best we can do is to keep loudly speaking truth
to power and letting them know, in no uncertain terms that we don't accept this
kind of behaviour, and that the regulators must stop shilly-shallying around
and do something which finally demonstrates that they mean what they say!

7 comments:

Just sent another letter of to my MP and Michael Fallon regarding Lord Stephen Green.

The responses so far have been that he is doing a good job in the Ministry of Trade. It's a bit like saying Adolph Hitler was a decent painter so he could apply for the Sorbonne after the war if it all went tits up.

Great article! How much more of this crap are we going to put up with?

Strange you should mention HSBC and Standard-Chartered in the same breath, P.M. Cameron has family links to both, I believe, in that his dad's paternal grandfather, Ewen Cameron was head of HSBC in London and his dad's maternal grandfather, Emile Levita, was director of Chartered bank in HK, all making a killing from the Opium trade in China.

The Co-op guy was clearly not criminal enough; for him to have been outed in the press would indicate that he was probably hindering the big agenda rather than a part of it, and what he was getting up to in private is pussy stuff compared to the satanic RBS bod mentioned in this piece, purportedly written by a fomer mind-controlled Mi6 escapee:

As Tony Shearer concludes in a spot-on comment in response to Sigrun Davidsdottir's (somewhat rhetorical?) question "Why are bankers investigated in Iceland and not so much elsewhere?" in her latest excellent Icelog post:

"The Chancellor, supported by the Prime Minster, has hung a large sign over the City of London to say that we are open to business for crooks and those with low morals. Iceland has hung out a sign to say the opposite. By the actions of the Icelanders and the inactions of the UK, the undesirables will avoid Iceland and chose London."

As Tony Shearer concludes in a spot-on comment in response to Sigrun Davidsdottir's (somewhat rhetorical?) question "Why are bankers investigated in Iceland and not so much elsewhere?" in her latest excellent Icelog post:

"The Chancellor, supported by the Prime Minster, has hung a large sign over the City of London to say that we are open to business for crooks and those with low morals. Iceland has hung out a sign to say the opposite. By the actions of the Icelanders and the inactions of the UK, the undesirables will avoid Iceland and chose London."

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!